Project Banas (Akil) Report

7/28/2019 Project Banas (Akil) Report

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BANAS OIL MILL PVT.LTD.

A

PROJECT REPORT

ON

WORKING CAPITAL

AT

BANAS OIL MILL PVT. LTD.

SUBMITTED TO

HEMCHANDRACHARYA NORTH GUJARAT

UNIVERSITY,PATAN

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE TYBBA PROGRAMME

GUIDED BY: SUBMITTED BY:

MR. Chirag patel Mansuri Akil Y.

(LECTURER) ROLL NO:- 41

EXAM NO:- 685

M.K.SCHOOL OF BUSINESS MANAGEMENT., PATAN

ACADEMIC YEAR: 2012 2013


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PREFACE

Experience is the best teacher. This saying has played a guiding role

including the industrial visit as a part of the curricular of B.B.A. program of

Hemchandracharya North Gujarat University. This visit and consequence

report allows the student to practically visit the industry and study real

business environment.

This practical training in B.B.A. program develops the feeling or awareness

in the management students about the difficulty and challenges of the

business world. Only theoretical knowledge does not import complete

education is must be accompany with practical experience to add meaning

to education. To fulfill this objective industrial visit and project report have

become and integral part B.B.A. program. Thus, we have a practical outlook

of the managerial experts and witness the function of management in real

business. We were taken to Banas oil mill Pvt. Ltd. And I have tried my

level best to present report based on this visit.


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ACKNOWLEDGEMENT

Practical training is one of the most important requirements in B.B.A.

Through this acknowledgement, I express of our sincerer gratitude towards

all those people helped in the preparation of this, project which been a

learning experience.

I am thankful to owners of the company and Finance manager. Mr. Jayesh

bhai Acharya , who has granted me the permission to undertake the

Industrial training at Banas oil mill Pvt.Ltd. Once again I am thankful to all

staff members and executives, who had spent their valuable time in feeling

me the crucial information. I am also thankful to staff for their co-operative

behavior.

I am also thankful to our collage authorities for conducting this training. I

would sincerely thank our principal Mr. C.D.Modi for imparting me an

opportunity to put me in the stream of practical management. I would also

like to thank our prof. Patel Chiragbhai for their support.

Mansuri Akil Y.

Roll No:41

Exam No:685


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EXECUTIVE SUMMARY

During my training, I contact various executive and officers & collect

various data from them. I have tried my best performance to prepare this

project.This practical training will be certainly beneficial for me in the

future.

This project starts with the introduction of Banas oil mill Pvt. Ltd., which

briefs about different aspects of Banas oil mill such as name of managing

persons, history and development of the organization, address, organization

structure etc.

This project report is mainly based on finance department so this report

contains all relatively information about finance department.Here varioustechniques are included like:

- Operating cycle analysis

- Ratio Analysis

- Schedule of changes in working capital


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CONTENT

Sr.No. Particular Page No.

I Preface

II Acknowledgement

III Executive Summary

1 GENERAL INFORMATION 1

1.1 Brief history 2

1.2 Company profile 3

1.3 Vision and Mission 4

1.4 Registered office 4

1.5 Auditors and bankers 5

1.6 Organisation chart 6

1.7 Product profile 7

2 FINANCE DEPARTMENT 8

2.1 Introduction 9

2.2 Financial planning 10

3 WORKING CAPITAL 11

3.1 Introduction 12

3.2 Working capital management 13

3.3 Concept of working capital 173.4 Types of working capital 18

3.5 Determinants of working capital 21

3.6 Need for working capital 253.7 Working capital ratio 28

3.8 Cash budget 31

4 CONCLUSION 32

5 BIBLIOGRAPHY 33


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6 ANNEXURE 34

6.1 Profit & Loss Account 35

6.2 Balance sheet 37


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1.

General

Information

1.1 Brief History

BANAS OIL MILL PVT.LTD.The company has very good reputation in

Gujarat state. It was started in to manufacturing company since 1996. The

company is spreader over to 18,000 square feet land.


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BANAS OIL MILL PVT.LTD. having 85 distributors across the country.

Company covers almost 11% market area. Marketing department of the

company is made up of these separate divisions. All marketing functions

like research, product planning distributions, and advertising, promotional

plans are performed by three divisions. Design and engineering department

develops new products and on launch project.

The company has staff of employee and workman. The all aspects related to

department. The company has good recruitment and selection process.

Banas oil mill Produces 5 ton oil per day. Banas group is dedicated to in

going research in new processes and material with a goal to maintain its

reputation of constantly introduction outstanding product. Company

designs and development department is working on the project to increase

the quality and quantity of oil to make the customers satisfied.

1.2 Company Profile

Company Name: BANAS OIL MILL PVT.LTD.

Establish Year : 1996

Address :116/117 G.I.D.C. Estate, Chandisar, (N.G.)

Ta-Palanpur Dist: Banaskantha


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City : Chandisar

State : GUJARAT

Country : India

Phone (O) :

(Mo):

02742 283411

9426004899

1.3 Vision and Mission

The present companys promoters are very enthusiastic and energetic

persons. Mr. Jayesh bhai Acharya have build the Banas companies in

Chandisar of Banaskantha District. They started the firm as a small

producing unit and turn into large group of companies manufacturing

items. The group is dedicated to on going research in new process and


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material with a goal maintain its reputation constantly introducing

outstanding products.

The companys main objectives to maximize quality of product to its loyal

customers under one shed. This is the important strategic concept for which

holds companys design and engineering department is working on various

project of launching new products. Company also wants to get benefit of

globalization and liberalization policy of government.

1.4 Registered office

Regd. office:- 116/117 G.I.D.C. Estate, Chandisar, (N.G.)

Ta-Palanpur Dist: Banaskantha

1.5 Auditors and Bankers

The Auditors of Banas oil mill is Sanjaybhai and company charted

Accountant and Address as are under.

Sanjay Desai and company.


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Chartered accountant.

2- Gurukrupa society

Akesan Road,

Palanpur 385001

Phone :- 9033994510

Bankers:-

Bankers of the Banas oil mill pvt, ltd. are as under:-

1. HDFC Mehsana

2. Bank of Baroda Palanpur

3. Kotak Mahindra bank Palanpur

1.6 Organization Structure

Organization chart


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Chairman

Marketing Adm.

& AccountManaging

Director

Director

Development


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1.7 Product Profile

People satisfy their needs and wants through product. Anything that can beoffered to satisfy their need or want is called product. The product is a

bundle of satisfaction. It can include all kind of equipment like as physical

good, service and ideas. A product is also something which is made in a


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Sales

& Mgt

Adm.

&Acc. Director Designer& Eng.

Quality

ServicesPurchase Stores

Production

M/O

Shop

Assembly

Fitting

Packing

Colour

Winding &

Repairs

In-process

Inspection

Final

Inspection

Testing

In-coming

Material

Ins ection


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factory in sort a product is the some total of physical social and

psychological benefits.Company produces mustard oil of good quality and

some other product of mustard.

2.M.K.SCHOOL OF BUSINESS MANAGEMENT., PATAN

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Finance

Department

2.1 INTRODUCTION OF FINANCE DEPARTMENT

Financial management is concerned with acquisition of funds and investing

those funds in such sources where earnings will be higher. It is an activity

which is concerned with planning, organizing, directing and controlling of

firms financial resources.


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Finance is the bloodline of each organization. Without finance

organizational activities cannot goes on smooth running. There should be

optimum investment in sources like working capital, because it requires

routine control over financial transaction. Working capital should not be

inadequate or excessive, it should be optimum one.

2.2 FINANCIAL PLANNING

To ensure smooth functioning and constant growth and development of

business. Company always thinks about future financial plans aboutinvestment in long term securities and other means of finance. Firm should

have to maintain adequate balance of finance for the smooth running of the

business activities.


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Choice Laboratories is doing financial planning for its future growth and

expansion of unit at a large extent for long term purpose while for the short

term purpose they plans for production, sales, advertising, working capital,

banking transactions etc. Company has done planning for new project of gel

toothpaste manufacturing unit near by existing one. Project costs to Rs. 3.5

crore. Project will be completed within next December. It is estimated that

the new project will increases 50% more production as compared to present

one.

3.M.K.SCHOOL OF BUSINESS MANAGEMENT., PATAN

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Working

capital

3.1 INTRODUCTION

Business capital is broadly divided into two groups; fixed capital and

working capital. Fixed capital refers to the funds invested in such fixed or

permanent assets as land, building, machines etc. while working capitalrefers to funds locked up in materials, work in progress, finished goods.

Receivables and cash etc. since these assets are known as current assets. In


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very simple term working capital may be defined as capital invested in

current assets.

Working capital management is concerned with the problems that arise in

attempting to manage the current assets, current liabilities and the

interrelationship that exists between them.

The term current assets refers to those assets which are the ordinary course

of business that can be turned into cash within one year without distribution

the firms operation and consists of cash, inventory receivables andmarketable securities.

The term current liabilities are those which are intended at their inception to

be paid in ordinary course of business, within a year out of CA or earning of

the form and consists of account payables, bank OD and out standing

expenses.

The working capital management is thus concerned with maintaining a tread

off between profitability and risk associated within a firms level of CA and

CL.

The basic goal of working capital is to manage the firms CA and CL so as

to achieve a satisfactory level of working capital. It is necessary because the

firm is not able to maintain thais level it is likely to become insolvent and

may even be forced into bankruptcy.


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3.2 WORKING CAPITAL MANAGEMENT

In simple words working capital means the fund that is used for dealing

with the day to day activities. It also means the fund which is raised during

end of accounting period to generate current income of an

industry.Management of working capital refers to the management of

current assets includes of cash, management of inventory and management

of receivables.NATIONAL has keeping working capital as stander in the

industry and converted such capital in infixed assets for long term base,

which satisfied financial institution. They also have comprises working

capital as follows:-

Management of inventory

Management of receivable

Management of cash

MANAGEMENT INVENTORY

Inventory is the stock of the company and comment there are that make up

the product of various factors which inventories exists in manufacturing

company are raw material, raw material work in progress and finish goods,

the main objective of inventory management if to avoid the over investment

in inventories.

MANAGEMENT OF RECEIVABLES


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In modern organization selling of goods in credited become results in book

debt or account receivables. It is the important tools for the increase the

sales volume period. The company also gives credit facility to its daily,

responsible and regular customer to increase in sales volume of business.

CAPITAL STRUCTURE

The terms capital structure is used to represent the proportionate

relationship between devote and equity includes paid up share capital and

reserve&surplus. The financial or capital structure diction is significance,managerial decision. The company will have to plants capital structure

initially at the time of its promotion in short ratio between the debt equity is

called the capital structure.

MANAGEMENT OF FIXED ASSET

Capital budgeting may be defined as decision making process by which an

organization evaluate the major anvestments proposals keeping due

consideration for the,

Amount needed for investment

Amount available for investment


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Amount that can be acquired from different resources

The cost of raising funds

Funds cash flows

There are many techniques, which can be used to determine profit balance

for the project.There are various kinds of budgeting system such as;

Sales budget

Production budget

Purchasing budgetCash budget

Capital expenditure budget

In short, spending money is the acquisition of such expenditure and

facilities are called capital expenditure and planning of such expenditure ia

called as budgeting.

CAPITALISATION

Capitalisation means it is comprises of a companys ownership capital

which included capital task and surplus in whatever for it may appear

borrowed capital which comprises of bonds and similar evidence of long

term debt.


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There are three main types of capitalization. Thay are as under;

Over capitalization

Under capitalization

Balance capitalization

By capitalization point of view BANAS OIL MILL PVT.LTD. is having

balance capitalization is financially position is very strong.

3.3 CONCEPT OF WORKING CAPITAL

There are two concept of working capital.

(1) Gross working capital

(2) Net working capital


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1) Gross working capital

Gross working capital simply called as working capital, refers to the

firms investment in current assets. Assets which can be converted

into cash within an accounting year and include cash short-term

securities,debtors, bills receivables and stock investment.

2) Net working capital

Net working capital refers to the difference between current assetsand current liabilities. Net working capital can be positive or

negative.

A positive net working capital refers will arise when current assets

exceeds current liabilities.

A negative net working capital occurs when current liabilities are in

excess of current assets.

3.4 TYPES OF WORKING CAPITAL

Basically there are two types of working capital ia needed in

business:


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1) Permenant working capital which is permenantly blocked in

business

2) Variables working capital which varies with the requirement of

business

1.PERMENANT WORKING CAPITAL

It is the type of working capital which is permenant locked up in current

assets. Some cash is required to maintain stocks of raw material,finishedgood at their normal level, for paying wages and salaries regularly.

Permenant working capital is of two kinds.

(A) Initial working capital

In the period of its operation, a company must have enough money to pay

certain expenses before the business. In the initial years, bank may not grant

loans or overdrafts, sales may have to be made on credit and it may

necessary to make payment to the creditors immediately. Hence the turns

will have to be supplied by the owners themselves in the initital years.

(B) Regular working capital

It is the working capital required to continue the regular operations. It is

required to maintain regular stocks of raw material and work in progress


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and also of the finished goods which must be maintained permenant at a

definite level. Regular working capital is the excess of current assets over

current liabilities. It ensures smooth operations of the business.

1. VARIABLE WORKING CAPITAL

It is that of working capital which is required to meet the seasonal

needs as well as special needs of the business. It is therefore,

subdivided into two parts.

(A)Seasonal working capital

Some business enterprises require additional working capital during a

particular season. For example, the sugar mills have to purchase

sugarcane in a particular season and have to employ additional labour

to process it. They must meet this requirement by providing

additional funds for a temporary period.

(B)Special working capital

In all enterprise,some unforeseen events do occur when extra funds

are needed to tide over such situation. Some of these events are

sudden increase in demand for the final product, downward


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movement of price and sales during depression necessitating extra

working funds, considerable rise in price of raw material so more

funds will be needed to maintain their stocks at the normal level and

strikes or natural calamities which also force the management to

provide for additional funds.

3.5 DETERNINANTS OF WORKING CAPITAL

There are number of factory which determines the amount of

Working capital in business.


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1) Nature and volume of business:-

The nature of business is an important factor in deciding the

amount of working capital. For example the amount of working

capital is generally more in trading concerned and in service units

have also to invest large funds in working capital. In some

manufacturing unit also the working capital holds a significant

place. On the other hand, public units require less working capital.

Private manufacturing units needs more working capital ascompared to public utilities.

2) Length of manufacturing cycle:-

The longer the period a manufacturing cycle takes, the larger is

the amount of working capital is required, because the fund gets

locked up in the production process for a longer period of time.

Because of this when alternative methods of production are

available; the method with the shortest manufacturing cycle

should be selected to see that the manufacturing cycle is

completed within a specified period. Any delay in production is

bound to increase the requirement of working capital.

3) Business fluctuations:-

Business fluctuations are of two types:


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(1) Seasonal fluctuations which arise out of seasonal changes in demand

for the product and cyclical fluctuations which occur due to ups and

downs of economic activities in the country as a whole.

(2) If demand for the product is seasonal production will have to be

increased during the season and it will have to be reduced during the

off season correspondingly, there will be fluctuations in the

requirement of working capital.

4) Production Policy

If the policy of constant production is adipted, there are two

possible effects. Policy helps in reducing working capital

requirement to the lowest level. But if demand for the product is

seasonal, this policy raises the level of inventory during off-

season and there by increase the working capital requirement.

5) Credit Policy

If the present day circumstances, almost all units have to sell

goods on credit. The nature of credit policy is an important

consideration in deciding the amount of working capital


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requirement. The larger the volume of credit sales, the collection

of payment takes, the greater will be the requirement of working

capital.

6) Availability of credit

The amount of credit that a firm can obtain as also the length of

the credit period significantly attests the working capital

requirement, the greater the prospects of getting credit the smaller

will be its requirement of working capital because it can easilypurchase raw material and other requirement on credit.

7) Growth and expansion

The working capital requirement increase as companys sales

increases. It is difficult to precisely determiner the relationship

between volume of sales and working capital requirement. A

growing firm may need to invest funds in FA in order to sustain

its production and sale. Advance planning of working capital for

growing concern.

8) Profit and its distribution

The level of profit also determines the level of working capital

requirement. The availability of internal funds for working capital

requirement is determined not merely by profit margin but also


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the manner of appropriations for taxation, dividends, reserves and

depreciations.

9) Price level changes

The increasing shifts in the level make function of financial

manager more difficult. He should anticipate the effect of price

level changes on working capital requirement of the firm.

Generally rising price level will require a firm to maintain higheramount of working capital. However companies, which can

immediately revise their product price with rising price level, will

any problem.

10) Operation efficiency

The operation efficiency of the firm relates to the optimum

utilization of resources at the rate of minimum cost. The firm will

be effectively contributing to its working capital, if it is efficient

in controlling operating cost. Better utilization of resources

improves profitability and thus helps in releasing the pressure on

working capital.

3.6 NEED FOR WORKING CAPITAL:


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The need for working capital cannot be overemphasized. The need of

working capital arises due to the time gap between production and

realization of cash from sales. So the working capital or investment in

current assets becomes necessary need for working capital. It arises due to

following reasons:-

OPERATING CYCLE

Operating cycle is the time duration requires for converting sales into cash

after the conversion of resources into inventories.

First of all a firm purchase Raw Material, then after some processing it is

converted into workinprogress and after this further processing is done to

convert workinprogress in finished goods. After the raw material is

converted into finished goods, sales are made. Sales are no always full cash

sales; there are credit sales also. These credit sales after some period are

converted into cash. So the whole process takes the time. This time taken is

known as the length of operating cycle.

So operating cycles includes:-


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1. Raw Material conversion period (RMCP)

2. Workin progress conversion period (WIPCP)

3. Finished goods conversion period (FCP)

4. Debtors Conversion period (DCP)

So operating cycle can be known as following:-

Sales

WORKING CAPITAL OF BANAS OIL MILL PVT.LTD.

2010-2011


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Raw Material

Work in

Cash Collection

from

Finished Goods

Credit Cash Sales


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Current asset=153428

Current liabilities=7755

Working Capital= C.A.- C.L.

= 153428-7755

= 145673

2010-11

Current asset=160898

Current liabilities=7737

Working Capital= C.A.- C.L.

= 160898-7737

= 153161

3.7 WORKING CAPITAL RATIO

(1) Stock turn over ratio


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This ratio measure how many times the average stock is sold

during the yaer . The ratio establishes a relationship between cost

of good sold and average stock.

Stock turn over ratio=Sales/Closing stock

YEAR SALES CLOSING STOCK

RATIO=

SALES/CLOSING

STOCK

2010-11 850153 331979 2.56

2011-12 1023723 517159 1.98

Interpreatation:-


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In the above information regarding in 2010-11 ratio rate 2.56 but

in 2011-12 stock turn over ratio is 1.98 it means decreases turn

over ratio.

(2) Fixed asset turn over ratio

Fixed asset turn over ratio is relationship between sales and net

fixed asset .

Fixed assets turn over ratio=Sales/net fixed assets

YEAR SALES NET FIXED

ASSETS

RATIO=SALES/NET

FIXED ASSETS

2010-11 850153 14856 57.23

2011-12 1023723 15018 68.17

Interpretation:-


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In the above information regarding in 2010-11 ratio rate 57.23 but in

2011-12 it is about 68.17 so it means it is increasing fixed assets turn over

ratio.

(3) Working capital turn over ratio

Working capital turn over ratio is working capital ratio is closely

related to ale. It means how efficiency the working capital is

utilized. Net working capital is the excess of current asset over,

current liabilities. This ratio indicates number of times the

working capital is converted into sales.

Working capital turnover ratio= Net sales/ working capital

YEAR NET SALES WORKING CAPITAL RATIO = NET SALES/


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WORKING CAPITAL

2010-11 850153 770595 1.10

2011-12 1023723 850437 1.20

Interpretation:-

In the above information regarding in 2010-11 ratio rate is 1.10 but in

2011-12 it is about 1.20 here it is increasing the working capital turn over

ratio.

3.8 CASH BUDGET

Cash budget is basically incorporates estimates of future inflows and

outflows of cash over a projected short period of time which may usually be

a year, a half or a quarter year. Effective cash management is facilitated ifthe cash budget is further broken down into mouth,week or even on daily

basis.

There are two components of cash budget

Cash inflows and

Cash outflows

Cash inflows

Cash sales


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Cash received from debtors

Cash received from loans, deposits, etc

Cash receipt of other revenue income

Cash received from sale of investment or assets.

Cash Outflows

Cash purchases

Cash payment to creditors

Cash payment for other revenue expenditure

Cash payment for assets creation

Cash payment for withdrawals, taxes, repayment of loans.

4. CONCLUSION


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Looking through all the angel and aspects of the unit, I can conclude that

the unit is running very efficiently and very smoothly, I have observed that

BANAS OIL MILL PVT. LTD. is a unit not only ahesd technically but also

administratively. It has a bright future lying ahead going through all the

departments, we can see the department are working hard and trying their

best to still grow more.

I think that the company has finance department analysis with the help of

various techniques like operating cycle analysis, ratio analysis schedule of

change in working capital on the development and diversification of theservices the company has good relations with staff as well as the workers

and the outsiders. Suggestions are given on the basis of findings for better

understanding of working capital management.


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5. BIBLIOGRAPHY:-

Books Name:- Prasanna Chandra

Financial Management(fifth Edition) by Tata Mcgraw

Hill publishing Company Limited

Khan M.Y. & Jain P.K.

Financial Management(1998 Second Edition)

Tata New Delhi India


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6.

Annexure

6.1PROFIT & LOSS ACCOUNT


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PARTICULAR

SCH

NO.2010-11 2011-12

-: Income :-

Sales 08 850153.00 1023723.00

Other Income 09 0.00 0.00

Total (A) 850153.00 1023723.00

-: Expenditure :-

Roe material

Consumed

10 269093.00 263357.00

Manufacturing

Expenses

11 0.00 0.00

Payment to and

provision for

Employees

19 0.00 0.00

Selling & distribution

exp.

12 5100.00 4760.00

Administrative exp. 13 30566.00 27707.00Financial charges 14 2550.00 2380.00

Depreciation 299.00 299.00

Remuneration of

directors

189550.00 189550.00

Total Rs. (B) 497158.00 488053.00

Profit (A-B) 352995.00 535670.00

Provision For

taxation

7737.00 7737.00

Provision For

deferred tax

192.00 192.00

Profit of the year

transfer to balance

345066.00 527741.00


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sheet

6.2BALANCE SHEET

2010-11 2011-12


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Particulars

(A).Share Holders Fund

share Capital 1 170000 170000

Reserve and

surplus

2 18003 17741

(B). Loan Fund

Secured Loans 3 0 25500

Un secured

Loans

4 0 0

(C)differed tax

liabilities

Net differed tax

liabilities

362.00 192.00

Total source 188365 213433

(1).Fixed Assets

(a) Gross Block 15326 15317

(b) Depreciation 469 299

Net block 5 14856 15018

(2) Investment 6 25500 25500

(3) Current Assets,

Loans and Advances

Current assets 7 153428 160898

Loan and advance 8 0 0

Total of current assets

and loan and advance

(A)

153428 160898

(4) less current

liabilities

Current liabilities and

provisions

7755 7737

Total current liabilities B 7755 7737


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Net current assets (A-B) 145673 153161

Misc.exp. to that extent not

written off

2336 19754

Total of assets 188365 213433

Documents

Project Banas (Akil) Report